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Election financiers

Did the ministers and others know whose money they were getting?

Election financiers
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Ruukki Group, Ajanta, and a hitherto unheardof association called Kehittyvien maakuntien Suomi.
      The names came out, slightly awkwardly, from the mouth of Timo Kalli, the chairman of the Centre Party's parliamentary group, in the Finnish Broadcasting Company's main evening newscast last Wednesday.
      This small trickle of information, as Kalli revealed the names of his election backers, has set off a political mudslide of colossal proportions, and the digging-out operation continues.
With scant consideration for legislation on election financing and disclosure, a large number of MPs from several parties, among them some front-rank politicians and ministers, had hidden decent-sized sums in campaign funding behind vague support-groups.
      However, when the furore surrounding the Kalli case hit the front pages, many were frightened into action to clarify their own financing arrangements for the March 2007 elections.
Among the major players behind Kehittyvien maakuntien Suomi (the name of the organisation suggests that it is dedicated to advancing the economic prospects of developing areas in Finland) are businessmen Kyösti Kakkonen and Toivo Sukari.
      Sukari is currently involved in the proposed Ideapark shopping complex in Vihti, just outside the Greater Helsinki area, and he requires political support for his plans.
No less interesting are the names that emerge from behind the listed company Ruukki Group, or the investment firms Helsingin Mekaanikontalo Oy and Ajanta.
      Ruukki Group, which has itself reported on its funding of individual Members of Parliament, stated that it had donated EUR 20,000 to Timo Kalli's campaign association, EUR 10,000 to a similar body acting on behalf of Centre Party MP and Deputy Speaker Seppo Kääriäinen, a former Minister of Defence and Minister of Trade and Industry, EUR 10,000 to Paula Lehtomäki, Centre Party MP and current Minister for Environment in Matti Vanhanen's second cabinet, and a further EUR 3,000 to the campaign association of Social Democratic Party MP Reijo Laitinen.
      Mekaanikontalo meanwhile reported that it had handed out three lots of 10,000 euros, to Lehtomäki, to the election team of the National Coalition Party's Jyri Häkämies (at present the Minister of Defence), and - via the National Coalition Party's central funding arm - to the party's chairman and the present Minister of Finance Jyrki Katainen.
Aside from the EUR 10,000 it gave to Timo Kalli's team, Ajanta paid out EUR 5,000 to the election war-chest of the Centre Party's Anu Vehviläinen (the sitting Minister for Transport), and another 5,000 to Paula Lehtomäki.
      The Members of Parliament appeared to be blissfully unaware of the origins of their election funding.
      It may have come as a surprise to them, too, to learn that behind the companies shovelling money in their direction are to be found a group of rather colourful business types, including the big-league investors Kai Mäkelä, Ahti Vilppula, and Ari Salmivuori.
Vilppula and Mäkelä are both sizeable owners of Talentum and Alma Media, two influential media groups.
      They have also owned large holdings in the Ruukki Group.
      Ari Salmivuori's private investment company Ajanta has for its part distinguished itself by investing in a number of Finnish listed companies, including the sports equipment firm Amer (see earlier article).
      By reputation, Vilppula, Mäkelä, and Salmivuori are not regarded exactly as shining white knights or business angels, but as heavyweight investors who are used to reaping serious returns on the sums they lay out.
The Cavemen. This was the name that Ahti Vilppula and Kai Mäkelä started to use about themselves a few years ago.
      They dreamed it up from the Retretti Arts Centre in Punkaharju, near Savonlinna.
      The galleries and exhibition spaces at Retretti are both above and below ground, with a splendid concert hall carved into solid rock some 30 metres below the surface.
      The pair had set about investing in the arts centre, which had fallen on very hard times. Mäkelä said that he had got involved in the rescue project out of "ideals".
      It is hardly likely that this was the full story. Mäkelä has been described as a "turn-around artist", and has a track record of investing in badly-run enterprises that he could get a piece of relatively cheaply.
      This was a tactic honed through a series of cornering moves made during the 1980s.
      Perhaps the cavemen's companies were backing the politicians, too, out of a sense of "ideals"?
At least the corporate social responsibility investments of Vilppula's company Mekaanikontalo have been right on the nose, since all of those in receipt of campaign finance funding are now ministers in Prime Minister Vanhanen's government. And yet, these front-line politicians have been almost embarrassingly unaware of their largest backers.
      In the corporate world, such naïveté would no longer pass without some loud coughing in church. The demands on corporate social responsibility have led to a situation where enterprises must know the business practices of even their smallest subcontractors.
      In election campaign funding, however, the politicians' motto seems to have been along the lines of: ‘the less I know about my backers, the better'.
Let us rewind a bit and examine the backgrounds of Vilppula and Mäkelä, just by way of informing the public and the politicians.
      Kai Mäkelä and Ahti Vilppula started to collaborate back in the 1980s, when they bought up large holdings in a number of provincial newspapers, even buying shares door-to-door from small investors and paying in cash.
      They moved on from the newspaper business into the financial market, and together with private investor Taito Tuunanen they started to collect shares in the then Union Bank of Finland (SYP, today known as Nordea, after a series of mergers) and in insurance company Sampo.
      They managed to get control of as much as a quarter of the Sampo stock - until they sold the lot, their entire holdings in both companies, in one fell swoop and for a considerable profit.
Vilppula's share of the proceeds alone was estimated to be worth tens of millions of markka at the time.
      This was enough of a windfall for the man in his thirties with a young family, and he withdrew to live in style on the Costa del Sol. More of him later.
Mäkelä meanwhile continued his programme of buying up corners in companies.
      Towards the end of the 1980s, he bundled together his group of companies under the umbrella of the Nobiscum investment firm, and listed it on the Helsinki Stock Exchange in August 1989.
      In 1990, Nobiscum appointed Matti Vikkula as CEO, and under Vikkula the firm continued to take over companies, sell them off, and buy others.
      Vikkula has thereafter often been seen not far from wherever Mäkelä happens to be.
      At present he is the Managing Director of the Ruukki Group.
When the recession bit and stock prices began to tumble, Nobiscum ran into trouble.
      Eventually in October 1992 the company filed for bankruptcy.
      Mäkelä was not left grieving for very long. Together with Rauno Puolimatka, he established the free-newspapers and direct marketing enterprise Janton on the ruins of Nobiscum, and Janton later went on to become a successful listed company in Helsinki.
      Another who was involved in Janton was Ari Salmivuori, but we shall come back to him, too, a little bit later.
First we must catch up again with Ahti Vilppula.
      He didn't remain content for very long loafing and golfing in the Spanish sun.
      Vilppula's moves are on occasion so deft and speedy that it is can be hard to keep up.
      Here is a brief recap for the benefit of ministers responsible for trade to the east:
      While in Spain, Vilppula set up an export company that carried on trade between the West and the then USSR.
      When the Soviet Union collapsed on itself, Vilppula moved to Brussels.
The old contacts behind the now-dismantled Iron Curtain proved very valuable.
      Vilppula became the Director of International Operations of the Kazakhstan-based metals and gas giant Euro-Asian Group in 1997.
      In a few years, the company grew to be a major name in the world chromium and ferrochromium markets.
      Vilppula's next port of call was South Africa, when SA Chrome & Alloys invited him to become a shareholder in 2001.
      Two years on, Vilppula became an owner of the metals firm Kermas Limited, which bought large mines and smelters in Russia.
      The company, registered in the British Virgin Islands, is active in the production of and international trade in ferrochrome and chrome ore, and is one of the world's largest producers. It has interests in Russia, Kazakhstan, India, and Turkey.
Vilppula is a player with a capital P, but is there something dodgy about his business activities?
      What is certainly true is that companies with which he is involved have flagged up the interest of financial regulators in Belgium, Switzerland, and Luxenbourg.
      A report by the Finnish weekly magazine Apu last autumn suggested that the joint operation sought to unravel Vilppula's complex business strands.
      The investigation did not lead to any further action in respect of Vilppula himself.
      What is also known is that Vilppula has had close and cordial contacts with a group of billionaires known as the "Kazakhstan Trio", who are suspected by the Belgian authorities of money laundering, counterfeited documents, and links to organised crime. Vilppula told Apu that he had severed his cooperation with these gentlemen years ago, in 2001.
      On the Finnish front, Vilppula was this spring questioned by police under suspicion of insider trading in connection with the shares of telecoms operator Saunalahti.
And what about Ari Salmivuori, a major investor who has been living abroad for the past fifteen years, and whose photograph could even not be found from the archives?
      What sort of chap is he, then?
      Salmivuori and his company Ajanta are largely unknown to the general public. Within the inner circles of business and politics, however, Salmivuori is a familiar enough face: in recent years Ajanta has been an active player on the Finnish securities market.
      In the last two or three years, Salmivuori has been involved in the ownership arrangements of Saunalahti, the large telecoms operator Elisa, and the sports equipment firm Amer.
Salmivuori reports that over the past 12 years he has given a total of nearly EUR 1 million in campaign support to candidates from different political parties.
      He says that the reason for his financial backing lies in his family background - his father Kaarle Salmivuori served for 20 years as City Manager in Järvenpää, north of the capital, and was from 1970-1975 also a Social Democrat MP.
      "My father was a Member of Parliament, who at every general election was obliged to go with cap in hand to the trade unions and other organisations close to the party, asking for support. The upshot of it all was that our family was extremely poor", says Salmivuori.
In Salmivuori's view, election funding guarantees that other people can get into Parliament besides the privately wealthy.
      Salmivuori says that he has chosen those whom he will support on the strength of recommendations from friends.
      "After spending 15 years living out of the country, I do not know any of the present crop of ministers personally. Ajanta has not got any benefits from its support of candidates. Nor does it want any."
      Salmivuori says he assumed that the candidates in receipt of funding would themselves have made a declaration of where the money came from.
      "I just took that matter for granted. I imagined that they would have taken pride in the fact that I had given them my support. I'm proud to give support where I can."
Ari Salmivuori is known in Finland as a business partner of the Icelandic investor Thor Björgólfsson.
      He was involved in arranging the deals by which Björgólfsson became first a major shareholder in Saunalahti and later in rivals Elisa.
      Salmivuori was also on board in the fall of 2006 when Björgólfsson attempted to buy the State-owned real estate firm Kapiteeli through his company Samson Properties.
      In the end the deal fell through despite Salmivuori's efforts, and Kapiteeli was sold to the Finnish firm Sponda, even though Samson had allegedly offered more money.
This January, Salmivuori suffered the biggest losses of his career to date on the buying and selling of shares in Amer. Ajanta had taken a position on forward transactions amounting to close to a 20% holding in the sporting goods company, but was forced to sell off its interest at a substantial loss when the Amer stock price took a steep dive in response to a profit warning.
      It was rumoured in the market at the time that the investment company had caught a cold to the tune of as much as EUR 150 million. In reality the sum was probably a good deal smaller.
      In any event, the links with Thor Björgólfsson and Iceland remained strong, for Ajanta sold its stake in Amer to Thor's investment company Novator.
Salmivuori, Vilppula, and Mäkelä are rich men. According to estimates by the investment magazine Arvopaperi, Mäkelä's holdings in Finnish stocks alone had a paper value of EUR 146 million a couple of years ago.
      Vilppula recently acquired a house in London costing several tens of millions of euros, and he is not one to hide his wealth under a bushel - he drives a Bentley and a Ferrari and flies in a Falcon executive jet, though admittedly the plane is registered in the name of Helsingin Mekaanikontalo.
      That is the same Helsingin Mekaanikontalo that in the run-up to the last parliamentary elections paid EUR 10,000 donations to Eheän Suomen Tuki ry, to the National Coalition Party, and to Kymenlaakson Talousseura - in other words to ministers Paula Lehtomäki, Jyrki Katainen, and Jyri Häkämies.
These donations of ten grand a throw were pocket-money for Vilppula.
      In the statement issued by Mekaanikontalo the support was justified as "Helsingin Mekaanikontalo is realising its corporate social responsibility and taking part in the development of society by granting social donations to objects it regards as of importance."
      This is an exemplary piece of shouldering of responsibility by the company - which almost certainly assumed that the politicians would do their own share in the social responsibility department.
      They could, for instance, have declared which firms had backed their campaigns.
Although Vilppula's business interests are primarily located abroad, he has a good enough reason for wanting to support Finnish politicians.
      Together with Kai Mäkelä he has over the current decade been a major shareholder in companies such as Saunalahti, Alma Media, Talentum, and Ruukki Group.
      Last year Ruukki Group, a company that focuses on wood-based industrial business operations, had unveiled plans to build a large pulp mill and sawmill in the Kostroma Oblast in Russia.
      The project was handled primarily by Ahti Vilppula, who helped Ruukki to develop excellent contacts with the local governor, Viktor Šeršunov.
      However, last September the entire venture met with a critical setback, when Šeršunov - who had been dubbed the Russian godfather of the pulp mill project - was killed in a car accident outside Moscow.
In March of this year, Ruukki was obliged finally to bury the idea of opening up production in Russia.
      Not long afterwards, Kai Mäkelä announced he was selling his 18% holding in the company.
      The buyer was reported to be the Bahamas-registered RCS Trading, in the background to which is a Croatian family concern named Koncar.
      RCS Trading also has a controlling interest in the Kermas group of companies - for whom Vilppula works.
      Vilppula has himself sold a 10 per cent stake in Ruukki Group this spring to the Russian bank VTB.
Kai Mäkelä says that he did not know which politicians the Ruukki Group supported at the last election.
      Mäkelä has one basic guiding principle for election campaign funding: "I am always there to support anyone who looks after the interests of war veterans. It is my only principle. I am not in politics, so I can exert influence only through the agency of money. When I find others who think like me, I support them."
In spite of his strong personal contacts in countries east, Ahti Vilppula needed government help in his wrangling with the Russians over the Ruukki pulp mill venture.
      In connection with the Kostroma Oblast project, Vilppula met during the last parliamentary term with Paula Lehtomäki, then the Minister of Foreign Trade and Development, and Lehtomäki's support group received EUR 10,000 for the March 2007 elections from Ruukki Group and another 10,000 from Vilppula's Mekaanikontalo.
      Lehtomäki reckons that Vilppula & Co. have backed her because they can appreciate a politician who is active in his or her relations with Russia.
Lehtomäki takes the same line as Prime Minister Matti Vanhanen: a politician would be better off not knowing the source of his or her election funding.
      Will there be problems if it turns out that the benefactors have somewhat shady backgrounds?
      "Yes, there is a certain problem in that respect, of course. But to my mind, it is not a politician's job to turn policeman. The most important thing about transparency of electoral financing is that one does not get the wrong sort of associations emerging. And they cannot emerge if one does not know the source of the money", says Lehtomäki.
      She believes a reform of the legislation is in prospect. She also sees in the furore over election funding certain elements of a witch-hunt.
      "There is a feeling in the air that people do not want to understand that the political system is an integral part of the society. Every politician has certain interest groups and a certain background. Financial support is not the only criteria here for ties to different interests. Finland is a small country, where in practice everyone knows everyone else. I would not want politicians to have to live in a glass bubble", she says.
And what says Defence Minister Jyri Häkämies, whose portfolio also includes ownership steering of state-owned holdings?
      Practically all of Häkämies' election campaign budget, around EUR 45,000, was made up of admission charges for seminars arranged by his election committee. Of these, it has lately been reported that 10,000 euros came from Helsingin Mekaanikontalo, and a further 10,000 from Kyösti Kakkonen and Toivo Sukari's Kehittyvien maakuntien Suomi.
      Häkämies admits that he knew that Ahti Vilppula was involved with Helsingin Mekaanikontalo.
      As for those behind Kehittyvien maakuntien Suomi, he says he "knew or guessed" some of them.
How often are you as a minister dealing with the sort of decisions where the interests of benefactors such as these would come into play?
      "As Minister of Defence, never. In the steering role the answer is also never in a sense, but if you want to open things up, then of course in the case of Stora Enso [and the closure of the Kemijärvi pulp mill] there was an occasion that could be seen in that sort of light if someone wished to."
      The Ruukki Group would have liked to buy the pulp mill in Kemijärvi after Stora Enso elected to stop production and shut it down, but Stora Enso refused to sell.
The Finnish State is a major owner of Stora Enso - and Ahti Vilppula from Mekaanikontalo is also a significant owner of Ruukki Group.
      "Yes, I had discussions with the Ruukki people, and when they set out their own views on the Kemijärvi situation, yes, they lobbied very hard. For example on the question of whether or not there would be enough wood to run the place, and so on."
      Häkämies says that at no time during the lobbying did it occur to him that one of the figures behind the scenes at Ruukki was also one of his major campaign donors.
      Was it ever mentioned? "No."
      Have campaign donors ever put forward any demands?
      "Nobody has made an approach of that sort, that there would be this kind of linkage. Naturally I work on behalf of my constituency and the Kymi Valley region. But that sort of direct connection - I've never run into anything like that, and nobody has ever dropped hints. And I have not heard of anything similar from anyone else. I guess that's the most essential thing to remember in all this."
What do you think the donors sought to gain? What was behind the Mekaanikontalo or Kehittyvien maakuntien Suomi funding?
      "I think it is probably the same motives as the trade unions have when they give their backing to Finnish candidates with a union background. Why should companies not be able to give the same kind of support, and to promote candidates who reflect their own outlook on the world?"
Helsingin Sanomat / First published in print 18.5.2008

Previously in HS International Edition:
  Tapani Yli-Saunamäki: “Treasure chest” handed out money and paid campaign bills (20.5.2008)
  Brax wants monitoring of election campaign funding away from Ministry of Justice (19.5.2008)
  Prime Minister regards election campaign funding mess as serious (19.5.2008)
  Members of Parliament revising campaign finance reports (16.5.2008)
  Centre Party MP´s comments spark campaign finance row (15.5.2008)

See also:
  Ruukki Group offers to buy Kemijärvi pulp mill (21.12.2007)
  Icelandic investor among buyers of prime Helsinki real estate (21.12.2006)
  Ruukki Group to pull out of pulp mill and sawmill project in Russia (4.3.2008)
  British billionaire Ashley again becomes major owner of Finnish Amer Sports (24.1.2008)

heikki.hellman@hs.fi, jaakko.lyytinen@hs.fi, mari.manninen@hs.fi

  20.5.2008 - THIS WEEK
 Election financiers

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